Insurance Claims And Issues

Good Weather Ignored, Premiums Increase for Florida Property, CATClaims Coverage.

   It seems perverse on the face of it.

   Despite continued good weather for years now, meaning the total absence of Hurricanes and other Catastrophes, Property Insurance Premiums in Florida are rapidly increasing.

  There are reasons offered by Property Insurance Companies for their Premium Rate Increase Requests.  Their reasons are unrelated to the weather.

   There are two main reasons.  First, the cost of Reinsurance has skyrocketed.  Across the Insurance Industry, Reinsurance Premiums have reportedly risen by 15%.  Second, Property Insurance Companies have taken to complaining about the cost of "state-mandated discounts to those who have taken steps to harden their homes against storm damage."  Jeff Harrington, "In the Path of Rate Hikes" (St. Petersburg Times Online at tampabay.com, Thursday, October 1, 2009), published in print on Friday, October 2, 2009 with this different headline:  "Mild Hurricane Season Won't Save Homeowners From Higher Insurance Rates".

   Either are both of these reasons are perceived as good reasons by the Florida Insurance Commissioner, because Rate Increases have either been granted or are likely to be granted depending on each Insurer's individual Premium Rate Increase Request.  Id.

   The same linked article reports that there is a Hearing scheduled in Tallahassee, Florida on Tuesday, October 6, 2009 at which the fact of Property Premium Rate Increases will be addressed.  The Florida Insurance Commissioner is scheduled to testify, as are a representative or representatives of Citizens Property Insurance and the Florida Hurricane Catastrophe Fund.  The Hearing will be held by the Florida Senate Banking and Insurance Committee.  Plan to attend and make your voice heard then and there, or else make your voice heard by contacting members of the Committee and their staffs before then.

   Property Premium Payers, stay tuned.

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More Insurance Issues and not-so-Great Drywall of China: ...

   ... Property Insurance Policies and Their Pollution Exclusions.

    As was the previously posted situation concerning Commercial General Liability ("CGL") Insurance Policies, no reported cases have been found involving Chinese Drywall and Property Insurance Policies.  Similarly, in the absence of decided cases, general principles of Insurance Law must provide the only available guidance to predict the outcomes of Property Insurance Coverage Claims involving Chinese Drywall.

    In general terms, Property Insurance Policies are of two kinds.  By far the most prevalent is "all risks" Coverage.  It provides Coverage for "all risks" except to the extent that they are Excluded under the Policy.  The other type of Property Insurance Policy is "specified causes of loss" Coverage under which only specified causes of loss are covered.  The "specified causes of loss" Property Policy thus presents an additional set of Insurance Issues not present in cases involving "all risks" Coverage.  See generally Dennis J. Wall, "Property Insurance Coverage Issues:  Exclusions," Chapter 7 and in particular § 7:1 in "CAT Claims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008).  "All Risks" Policies were involved in all of the cases discussed in this post.

    After examining all of the available standard Exclusions in "all risks" Property Insurance Policies, the Pollution Exclusion stands out as the Exclusion most likely to be involved in Property Insurance Coverage Claims involving Chinese Drywall.

    The standard form of Pollution Exclusion in Property Insurance Policies which otherwise provide Coverage for "all risks," reads in pertinent part to exclude loss caused by:

    (e) discharge, dispersal, seepage, migration, release or escape of pollutants unless the discharge, dispersal, seepage, migration, release or escape is itself caused by a Peril Insured Against under Coverage C of this policy.

(Despite the reference to "a Peril Insured Against," an "all risk" Policy has never been found which provides Coverage for specified "Perils" instead of "all risks".  Perhaps as a result, there is never a Policy Definition of "a Peril Insured Against" under an "all risk" Property Insurance Policy.)

    "Pollutants" and "contamination" may be terms defined in another form in the Property Insurance Policy, or one or both may be defined as a part of the Pollution Exclusion, usually in the following words or in words like these:

Pollutants mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.  Waste includes materials to be recycled, reconditioned or reclaimed.

Pollution Exclusions and Policy Definitions from Property Insurance Policies can be found in many reported cases, including Arnold v. Cincinnati Insurance Co., 276 Wis. 2d 762, 787, 688 N.W.2d 708, 720 (Wis. Ct. App. 2004)(subscription required), link to Official Slipsheet Opinion here; and Yale University v. CIGNA Insurance Co., 224 F. Supp. 2d 402, 421 (D. Conn. 2002), case closed following settlement and dismissal.

    In evaluating the potential outcomes of Property Insurance Coverage Claims resulting from the use and installation of Chinese Drywall, then, it is important to focus on whether the Court is or is not likely to determine that the case involves "pollutants" and "contamination," and, if so, whether such pollutants and contamination were discharged, were dispersed, seeped, migrated, were released, or escaped before they caused the damage complained of. 

State Farm Dropping Discounts on the Way Out of Florida?

    State Farm is the largest Property Insurance Company in Florida measured by Premium volume.  It wants to increase its income in Florida by reducing discounted Premiums.  Some folks say this is a backdoor way of increasing Premiums without filing for Premium Rate Increases.

    The Florida Office of Insurance Regulation, i.e., the Florida Insurance Department, recently allowed State Farm to totally eliminate Premium discounts for State Farm Policyholders who (1) pay State Farm Premiums for more than one Insurance Policy, such as Auto Insurance, (2) installed burglar alarms in their homes, and (3) have not made Homeowner's Insurance Claims on their State Farm Homeowner's Insurance Policies.  The O.I.R. also allowed State Farm to reduce its Premium discounts to Policyholders who upgraded plumbing, electrical systems, and HVAC systems in their Homes.  See, e.g., Beatrice E. Garcia, "State Farm Can Drop Some Discounts on Homeowners Policies" (Miami Herald Online, Friday, August 7, 2009); Julie Patel, "Insurer Plans to Leave State/Rate Hike Coming for State Farm Home Insurance Premiums/State Regulators Approve Changes That Will Increase Premiums an Average 28 Percent" (South Florida Sun-Sentinel.com, Thursday, August 6, 2009).

    "However, State Farm can't reduce the credits it offers homeowners for installing wind mitigation features," Beatrice E. Garcia, supra, which are Insurance Premium credits required by Florida Statutes.  The reported reason is that the Computer CatClaims Models used by State Farm "to justify why the mitigation credits should be reduced" were not done on the same CatClaim Model as State Farm used when it filed supporting information with the O.I.R. for the required mitigation credits in the first place.  In other words, State Farm used one company's Computer CatClaims Model to show its compliance when it was initially required by the Florida Statutes to offer the Insurance Premium credits, but it "used another modeling firm's work as the basis" of its offered justification for reducing the statutorily required mitigation credits.  Beatrice E. Garcia, supra.

     Since these reports were published, the Florida Insurance Consumer Advocate has raised questions about the O.I.R.'s ruling.  Specifically, the Advocate has reportedly questioned allowing the total elimination of Premium discounts "for homeowners with smoke or burglar alarms, multiple policies through [State Farm] and few to no claims."  "House Keys" Blog, "Battle Brewing Over State Farm Discounts" by Julie Patel, posted on Sun-Sentinel.com on Friday, August 14, 2009.  The Advocate makes the point that Premiums are based on risk.  He reportedly questions whether these particular Homeowner's Insurance discounts, which appear to reduce State Farm's risk exposure, can or should be allowed without the scrutiny attracted by a formal Premium Rate Increase filing.  Id.

    Interesting point.  

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State Farm, Already Moving Out, Leaving Florida Mitigation Discounts Behind?

    State Farm has been stymied in its request for Premium Rate Increases in Florida.  Its requests have been rejected by the Florida Office of Insurance Regulation and the O.I.R. has been upheld by the Florida Courts.  State Farm is still moving across the Florida state line and does not want to issue Homeowner's and other Property Insurance Policies in Florida.

    State Farm has just filed a new Rate request.  State Farm reportedly wants to reduce home mitigation discounts under existing Policies, and also reduce or eliminate entirely discounts for State Farm Policyholders "remaining claims-free as long-time State Farm policyholders and for having multiple policies with the insurer, among other premium savings."  The net result would "spell higher premiums".  Jeff Harrington, "State Farm Asks to Eliminate Home Insurance Discounts in Florida" (St. Petersburg Times Online, Friday, July 24, 2009).  Of these discounts under fire from the State Farm Rate filing, the ones which have received the most attention are the discounts contemplated in the Florida Statutes for Homeowner Mitigation against Storm Damage.  See id.

    There appears to be a dispute brewing between the Florida Legislature, or at least one influential Florida Legislator, and State Farm over whether any Insurer can modify the insurance premium discounts addressed by the Florida Statutes.  The Florida O.I.R. reportedly supports State Farm's authority to do so, at least in the abstract.  See id.

     Significant Florida Statutes which address mitigation measures for homes against storm damage, appear to be silent on whether Insurance Companies can in essence provide Premium discounts in size or timing of their own choosing.  Take a look for yourself:

    Section 215.5586 of the Florida Statutes provides for Florida's My Safe Florida Home Program.  The Program is administered by the Florida Department of Financial Services, which includes the Florida Office of Insurance Regulation.

    Section 215.559 provides for Florida's Hurricane Loss Mitigation Program.

You can decide for yourself or, at your election, you can enlist the services of an experienced Insurance Lawyer.  The outcome of that analysis may affect your Insurance Premium, particularly if you or those you advise need Homeowner's Insurance Coverage in Florida.

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Notice Under Policies First-Party and Third-Party.

    Notice provisions in insurance policies require "notice" to the insurance company that there is a loss or a claim.  In basic terms, and depending especially upon the type of Policy involved, notice provisions can be liberally construed in favor of effecting coverage, or not.  Whether liberally construed or not, provisions for notice of loss are subject to conflict among the Courts.  The judicial conflict in question is whether the insurance company can prove, or must be proven to have been prejudiced where the notice is late.

    In what appears to be the majority view on this question, breach of the notice of loss provision results in a presumption of prejudice to the insurance company, but the presumption is rebuttable:

If the insured breaches the notice provision, prejudice to the insurer will be presumed, but may be rebutted by a showing that the insurer has not been prejudiced by the lack of notice.

Bankers Ins. Co. v. Macias, 475 So. 2d 1216, 1218 (Fla. 1985)(subscription required;  first-party case; claim of policyholder to personal injury protection benefits as a result of an auto accident).  Note well:  After diligent search online, this case was not to be found online in a free web site.

    This holding has been followed in a third-party case, or one involving a liability insurance policy provision and a claim against the insured rather than a claim by the insured.  Assurance Co. of America v. Lucas Waterproofing Co., 581 F. Supp. 2d 1201, 1207 (S.D. Fla. 2008)(subscription required); download the official Opinion issued by the Court on this issue in this case:  Download Assurance v. Lucas Waterproofing Co (S.D. Fla. 2008). at page 8 of the official Opinion..

    The conflicting and apparent minority judicial viewpoint on this notice issue is that the insurance company should prove prejudice resulting from an alleged breach of a provision requiring notice of a loss.

   

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Insurance Coverage and Other Issues for Homeowners and Condominium Associations.

           Troublesome issues over Insurance Coverage for Homeowners and Condominium Unit Owners may come from failed Insurance Coverage lawsuits or from Members not kept advised by the Board.  Sometimes both:  See "Associations/Homeowner Association Members Face Huge Assessment for Legal Fees" by Stephen Glassman and Donie Vanitzian (Los Angeles Times Online, Sunday, May 31, 2009).  The linked newspaper report prints this sound thought:  Even with the limited alternatives, the board needs to perform due diligence in obtaining at least a second legal opinion on its options and the proposed settlement.

 

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The Hurricanes Are Coming, The Hurricanes Are Coming!

    Is your Insurance Coverage prepared for Hurricanes?  The Hurricane Season officially begins on Monday, June 1, 2009.  Ready?  Explore the issues addressed in this report from Slate, by Martha C. White, "Hurricane Prudence/Is the Battered Insurance Industry Ready for the Storm Season?" (Sunday, May 31, 2009).

    The two main issues addressed in this report are the reasons why Property and Casualty Insurance Companies are so much sounder financially than Life Insurance Companies, and some of the changes in Florida Insurance since the 2004 and 2005 Hurricane Seasons struck the State.

    Speaking of Florida and incoming Hurricanes, President Barack Obama reports that Federal Government statistics reflect that "a huge percentage of people" has not experienced a Hurricane.  The statistics reflect that nearly half of the population on the Eastern Seaboard have recently moved to cities there, without experiencing a Hurricane.  See Steven Thomma, "Obama:  Hurricane Readiness is Residents' Responsibility" (McClatchy Newspapers Online, Friday, May 29, 2009).   The Federal Government has provided a potentially useful web site for information and/or planning for Hurricanes:  www.ready.gov.

    Florida newspapers are providing their Hurricane guides at about this time.  Check out in particular "What You Should Know About Your Insurance" in the Orlando Sentinel Hurricane Guide (Sunday, May 31, 2009).  And see also this piece in the Orlando Sentinel's Guide, "How to File an Insurance Claim After the Storm," or contact one of the many Florida State Government agencies, and Private Insurance Companies, listed at "Hurricane Central" on the web site of the Florida Insurance Council, www.flains.org.

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"Moral Hazard" Overwhelms Seventh Circuit Interpretation of a CGL Policy.

    Importing a justification for current foreclosures into the arena of Insurance Policy Interpretation, a panel of the Seventh Circuit Court of Appeals has held that under Indiana law, a residential General Contractor's CGL or Commercial General Liability Insurance Policy with a pre-1986 form provides no Coverage to the General Contractor when a Subcontractor causes damage and the G.C. is sued by the homeowners to pay for it:  Download Westfield Insurance Co. v. Sheehan Construction Co. (7th Cir. Opinion Filed April 29, 2009).

    The panel opinion wrote that the CGL was confined to "accidents of the sort we have mentioned," but then proceeded to say that the Court assumed that the case before it involved covered "Property Damage" caused by an "Occurrence".  The damage in that case resulted from water intrusion into residential homes.  See attached slipsheet at 1-2.  The Court applied  the Policy's "your work" Exclusion to bar all Coverage.  First, the "work" of a General Contractor in the opinion of the Court "is the whole project".  Id. at 3.  Naturally, then, an Exclusion of Property Damage "to '"your work'" arising out of it or any part of it and included in the "products-completed operations hazard"' is outside the policy's scope."  Id. at 2-3.

    Moreover, an Exemption added by a form first published by or for CGL Insurers in 1986 to the "your work" Exclusion, that this Exclusion "does not apply if the damaged work or the work out of which the damage arises was performed on your subcontractor," simply did not apply to this case.  The G.C.-Policyholder's CGL Policy contained an endorsement which included a Definition of, "your work," to include work or operations performed by the G.C. or on its behalf.  "The italicized phrase means that subcontractors' work is included in the scope of 'your work'."  Id. at 4.

    Indiana law applied by this panel of the Seventh Circuit required that CGL Coverage be totally excluded, the Court concluded.  The result would likely be different in other jurisdictions, such as Florida or Tennessee.  Id. at 5.

    A parallel post on this new decision is on Insurance Claims Bad Faith Law Blog at www.insuranceclaimsbadfaith.typepad.com.

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Property Insurers' Agenda Increases Premiums of Florida House.

    Property Insurance Companies' proposed legislation passed the Florida House.  The bill awaits the Florida Senate and the Governor.  Among other long-sought features, the Property bill would:

• Increase Citizens Property Insurance Company Premiums by 10% per year.
• Enable a Commission to recommend elimination of all or most of the Premium discounts for Hurricane Mitigation measures recently enacted into Florida Law -- measures to strengthen the construction of Florida Homes that were recently demanded by Property Insurance Companies.
• Increase Property Insurance Premiums including Homeowner's Insurance Premiums apparently, by 10% per year.
• Restrict Policyholders and other Insureds on adjusters they hire for assistance on their Homeowner's and other Property Insurance Claims, and enable another Commission to recommend more restrictions.

The potentially biggest feature of this bill even when it is put alongside these other very big features?  "Gradually reduce the $29 billion Florida Hurricane Catastrophe Fund by $12 billion."  Julie Patel, "Rates Would Rise Under Legislation/Florida House Passes Sweeping Property Insurance Bill" (South Florida Sun-Sentinel.com, Friday, May 1, 2009).

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State Farm, Already Appealing to Withdraw, Sent to Administrative Hearing.

    This is an Update to several posts here on State Farm's Petition to Withdraw Unconditionally from the Florida Property Insurance market, including posts on March 10 and March 13, 2009, and most recently on April 24, 2009.

    State Farm filed a Petition to withdraw entirely from the Florida Property Insurance market.  The Florida Insurance Commissioner (who heads the Florida Office of Insurance Regulation, or "OIR") conditionally approved State Farm's Petition if State Farm would among other things allow its agents to sell other Property Insurance Company Policies to replace the departing State Farm Insurance Policies.  State Farm asked to drop all of 1,200,000 Property Insurance Policies, 700,000 of which are reportedly Homeowner's Policies. Jeff Harrington, 'War Over State Farm Exit Goes to Court" (St. Petersburg Times Online Wed., April 29, 2009, published in print on Thursday, April 30, 2009).

    In a Catch-22 or Kafkaesque response, State Farm refused to allow its agents to sell other Property Insurance Policies other than its own -- and it was not going to sell any in Florida.  State Farm would allow its agents, however, to put all the State Farm Florida Property Insurance Policyholders in Citizens Property Insurance Company, the Florida "insurer of last resort".  As reported here previously, State Farm therefore appealed the OIR's conditions.

    However, thereafter State Farm also filed an Amended Petition again asking to be allowed to withdraw completely from the Florida Property Insurance market, without conditions.  On Wednesday, April 29, 2009, the Florida Insurance Commissioner hand delivered a letter to the Chief Judge of the Florida Division of Administrative Hearings requesting the appointment of an Administrative Law Judge to consider State Farm's Amended Petition for Formal Administrative Hearing.  Here is the OIR's letter:  Download 04.29.09 Letter To Florida DOAH From Florida Insurance Commissioner..

    And so the saga continues for State Farm leaving Florida Property.  In the interim, here is information assembled by the Florida Insurance Commissioner including online resources for alternative Insurance Coverage at http://www.shopandcomparerates.com and http://www.fmap.org:  Download Florida O.I.R. Helpful Information for State Farm Florida Policyholders.Updated 04.22.09.

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